Case Number: EC061888    Hearing Date: July 25, 2014    Dept: A

Lee v Lee

DEMURRERS (2)

Calendar: 16
Case No: EC061888
Date: 7/25/14

MP: Defendant, Wells Fargo Bank
Defendant, East West Bank
RP: Plaintiffs, William Lee and Angela Quon

ALLEGATIONS IN FIRST AMENDED COMPLAINT:
The Plaintiffs formed Wilrub Enterprises, Inc. on November 30. 2002. The Plaintiffs then entered into an oral agreement with Defendant, Joseph Lee, under which Joseph Lee would manage real properties for Wilrub Enterprises, Inc.
On August 17, 2004, Joseph Lee forged William Lee’s signature on a promissory note and personal guaranty of a real estate business loan with Defendant, East West Bank. On April 28, 2005, Joseph Lee forged William Lee’s signature on a line of credit and personal guaranty with Defendant, Wells Fargo Bank. The Plaintiff, William Lee, had no knowledge of the forgery until January 21, 2011 when he was advised by an employee at Wells Fargo Bank that he was listed as a guarantor. The Plaintiff seeks declaratory relief regarding his duty under the personal guaranty.
Further, Joseph Lee took the jewelry collection from the Plaintiff, Angela Quon. She seeks damages for the conversion of her property.

CAUSES OF ACTION IN FIRST AMENDED COMPLAINT:
1) Fraud
2) Declaratory & Injunctive Relief
3) Conversion

RELIEF REQUESTED:
1. Defendant, Wells Fargo Bank
Demurrer to second cause of action

2. Defendant, East West Bank
Demurrer to second cause of action

DISCUSSION:
This hearing concerns the Defendant’ demurrer to the Complaint on the ground that each claim

1. Demurrer of Defendant, Wells Fargo Bank
The Defendant argues that the second cause of action is barred by the statute of limitations. When the dates alleged in the complaint show the action is barred by the statute of limitations, a general demurrer lies. Saliter v. Pierce Bros. Mortuaries (1978) 81 Cal.App.3d 292, 300.
The Defendant argues that this claim is based on fraud and that it has the three year statute of limitations for fraud. This argument is inapposite.
It is the nature of the right sued upon, not the form of action nor the relief demanded, determines the applicable statute of limitations. Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal. 2d 719, 733.
The Plaintiff does not seek declaratory relief based on a claim that he or the Defendant, Wells Fargo Bank, engaged in any fraudulent conduct. Instead, the Plaintiff alleges in paragraph 36 that an actual controversy has arisen over his personal liability under the personal guaranty with Wells Fargo Bank. The cause of action arises from a contract, i.e., the Plaintiff’s contractual liability to Wells Fargo Bank under the line of credit and guaranty agreement. Since the contract is written, the statute of limitations is four years under CCP section 337.
The Defendant argues issues surrounding the delayed discovery rule and the Plaintiff’s duty to have made an earlier discovery of the guaranty agreement. The arguments offer no basis to find that the claim is untimely.
The application of the statute of limitations to a declaratory relief claim is based on whether the obligation at issue has been breached. If declaratory relief is sought with reference to an obligation which has been breached and the right to commence an action for “coercive” relief upon the cause of action arising is barred by the statute, the right to declaratory relief is likewise barred. Maguire, 23 Cal. 2d, at 734. However, if declaratory relief is sought before there has been a breach of the obligation in respect to which said declaration is sought or within the statutory period after the breach, the right to such relief is not barred by lapse of time. Id.
The Plaintiff’s claim arises from a line of credit and guaranty agreement. The Plaintiff’s declaratory relief claim seeks a determination on his contractual duty to make payments or guaranty the loan. This requires the Plaintiff to bring the declaratory relief action no later than four years after he allegedly breaches this obligation, i.e., after he fails to make payments.
A review of the First Amended Complaint reveals no allegation that the Plaintiff has breached the obligation to make payments or to guaranty the loan. There are no allegations indicating that the Defendant, Wells Fargo Bank, has demanded that the Plaintiff pay the loan and that the Plaintiff has refused to make the payment.
Instead, it appears from the pleadings that the Plaintiff has sought declaratory relief before there has been a breach of his alleged obligations on the line of credit. Since the pleadings indicate that the Plaintiff has sought declaratory relief regarding his duties under the agreement prior to a breach of his obligations, there is no basis in the pleadings to find that his claim is barred by the statute of limitations.

Finally, a demurrer is a procedurally inappropriate method for disposing of a complaint for declaratory relief. Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134 Cal. App. 4th 187, 221. This is based on the reasoning that an order sustaining the demurrer would leave the parties where they were, with no binding determination of their rights, to await an actual breach and ensuing litigation. This would defeat a fundamental purpose of declaratory relief, which is to remove uncertainties as to legal rights and duties before breach and without the risks and delays that it involves. The object of declaratory relief is not necessarily a beneficial judgment; instead, it is a determination, favorable or unfavorable, that enables the plaintiff to act with safety. This reasoning has established the rule that the defendant cannot, on demurrer, attack the merits of the plaintiff’s claim.
Here, the Plaintiff’s declaratory relief claim seeks a determination on his obligations under the written line of credit and guaranty agreement.

Therefore, the Court will overrule the demurrer based on the statute of limitations.

2. Demurrer of Defendant, East West Bank
This Defendant also claims that the Plaintiff’s declaratory relief cause of action is based on his fraud claim. As discussed above in the analysis of Wells Fargo Bank’s demurrer, this is incorrect. Instead, the Plaintiff seeks a declaration of his contractual duty to make payments or guaranty a business loan. Since the claim arises from a duty in a written contract, the statute of limitations is four years under CCP section 338.
Further, the claim is not time barred. As discussed above, the applicability of the statute of limitations to a declaratory relief claim is based on the obligation at issue. If declaratory relief is sought before there has been a breach of the obligation in respect to which the declaratory relief is sought, the right to such relief is not barred by lapse of time. Maguire v. Hibernia S. & L. Soc. (1944) 23 Cal. 2d 719, 734. A review of the pleadings reveals no allegation that the Plaintiff has breached his alleged obligation to make payments or to guaranty the business loan. Instead, the Plaintiff appears to have pleaded his declaratory relief claim prior to the breach.
Accordingly, there are no grounds to find that the Plaintiff’s claim is barred by the statute of limitations.

The Defendant then argues that the Plaintiff’s claim is uncertain. A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures. Khoury v. Maly’s of California Inc. (1993) 14 Cal.App.4th 612, 616. A demurrer for uncertainty will be sustained only when the complaint is so bad that the defendant cannot reasonably respond because the defendant cannot reasonably determine what issues must be admitted or denied, or what counts or claims are directed against the defendant. Id.
A review of the second cause of action reveals that the Defendant can reasonably determine that it is a declaratory relief cause of action and that it seeks a declaration of whether the Plaintiff has a contractual duty under guaranty agreement, i.e., whether the Plaintiff is personally liable. The Defendant can reasonably respond because it can reasonably determine whether to admit or deny the issues.
Accordingly, there are no grounds to find that the Plaintiff’s claim is uncertain.

RULINGS:
1. Defendant, Wells Fargo Bank: OVERRULE Demurrer to second cause of action

2. Defendant, East West Bank: OVERRULE Demurrer to second cause of action